It’s ironic that left-wing money cranks like me and right-wing money cranks like von Mises’s gold bug followers have so much trouble getting along. Us left-wingers, or anyway those of us in the tradition of William Greene and Benjamin Tucker, argue that the state’s money monopoly enables banks to charge a monopoly price for credit, and thereby keep independent access to capital artificially expensive for workers. The result is that the means of production are artificially scarce and costly, so that workers are put at a bargaining disadvantage against their employers.

The right-wingers argue that the central banking system makes credit artificially cheap, and that our bubble-prone FIRE (Finance, Insurance, and Real Estate) economy is caused by “free money.” They call us left-wingers “money cranks” (despite the fact that, in the eyes of conventional economists, they’re as cranky as we are) who want to create prosperity with inflationary fiat money.

Not so. Although Mises’s disciple Rothbard was one of those who dismissed left-wing mutual banking proposals as inflationary fiat money schemes, they’re actually based on a critique of the money monopoly identical to Rothbard’s critique of the life insurance monopoly. State insurance regulations, he argued, mandate capital reserves for life insurance companies far in excess of what actuarial considerations would require. They thereby function as an entry barrier that reduces the number of competing companies and enables them to charge a monopoly markup on the service of provicing life insurance.

That’s exactly what the state’s bank licensing laws do. They mandate minimum capital reserves even for banks that are solely in the business of issuing secured loans against collateral. That means it’s illegal for a group of ordinary people to form a banking cooperative and issue purchasing power against the members’ own property, interest free, unless they can also raise millions of dollars in capital reserves. So instead they have to pay a monopoly rate of interest to a capitalist bank that issues credit against their property.

And any venture that amounts to issuing credit against future performance without maintaining capital reserves, like Tom Greco’s mutual credit clearing networks, risks being shut down as an “unlicensed bank” (although I have hopes that they’ll soon be able to operate with impunity under cover of encrypted darknets).

The money issued by capitalist banks is indeed fiat money, created out of thin air, as the right-wingers say. When the Fed reduces reserve requirements for banks, it increases the amount of money the banks can lend into existence — at interest.

So the money is artificially cheap for the privileged banking monopoly to create — but at the same time, it’s artificially expensive for those that depend on them as a source of credit. Thanks to the state’s legal tender laws and bank licensing laws, the banks are in the position of a monopolist, empowered to charge interest on additional money that they lent into existence at no additional cost to themselves. But because they have a legal monopoly on the power to issue credit, they can charge a price for the service that bears no relation to the cost of providing it.

In terms of the sheer degree of statism, this is about the worst of all possible worlds. If the state were going to create a money supply by fiat, it would be far less oppressive simply to create it by depositing it into existence in people’s checking accounts interest-free (as the Social Credit people advocate), or spending it into existence (Greenbackism). Instead, the state creates money out of thin air — but delegates the function to a privileged class of parasites that charge usury for the function. It’s a classic example of what passes for “privatization” on much of the fake “free market” Right (like the folks at AEI, Heritage, and the Adam Smith Institute): The framework is just as statist, but there’s an additional, nominally “private” layer of mouths to feed, on top of the state bureaucrats. In practical terms, the “business” component of such “public-private partnerships” is really just another part of the state.

So both the left-wing and right-wing money cranks are really right. Here’s to money crank love.